Global banking regulators Tuesday issued final rules that aim to improve banks’ disclosure of their capital positions, and make them more consistent.
The Basel Committee on Banking Supervision says that, during the financial crisis, markets and regulators had a hard time assessing banks’ capital positions and making comparisons across jurisdictions. This challenge was exacerbated by insufficiently detailed disclosure from banks, and a lack of consistency in reporting across banks and jurisdictions, it notes.
The committee says that the lack of clarity may have contributed to uncertainty during the crisis and could have masked how far banks were relying on forms of capital that were insufficiently loss-absorbent.
The committee has issued final rules on the information banks must disclose when detailing the composition of their capital, in an effort to improve the quality and utility of these disclosures. “The disclosure requirements published today should help to improve market discipline by enhancing both transparency and comparability,” it says.
Stefan Ingves, chairman of the Basel Committee and governor of Sweden’s central bank, noted that, “the disclosure requirements adopted by the committee will let banks demonstrate the improvements to the quality of their capital bases as they proceed towards Basel III implementation. Clear and comparable disclosure is the key to improving both market confidence and financial stability.”